from the bitter-medicine dept

The last time Techdirt wrote about "pay for delay" deals, whereby a big pharma company essentially buys off manufacturers of generics so that the former can continue to enjoy monopoly pricing long after its patents have expired, things didn't look too good. Back in 2010, the Second Circuit had refused to re-hear a case on the issue after dismissing a lawsuit arguing these deals were anti-competitive. But now things seem very different, and not just in the US.

The basic issue before the Court, for all of the complexity of the laws, can be stated simply: does a brand-name manufacturer, faced with a potential generic competitor, act illegally if it pays money -- sometimes a quite sizable sum -- to the generic in a deal that postpones for a period of years the substitute version's marketing. Popularly, this practice is known as "pay for delay." It also has been called a "reverse payment agreement." The FTC has been opposed to such deals for years under antitrust law, but until the Obama administration, the Justice Department did not share its opposition; it now does.

One analyst has suggested that the legality of such deals is "the most important unresolved problem in antitrust policy today."

The rest of the SCOTUS Blog post examines the background to this case, and the arguments made by both sides in their briefs to the court, in great detail. Here's an important point at the end of its analysis, about how the case relates to growing concern over the way the patent system is functioning:

If there is a notable weakness in the industry's side of this case, it is that this Court does have its doubts about the soundness of a patent system that may, perhaps too often, grant monopolies. The briefs of the brand-name company and its settlement partners among the generic makers depend very heavily upon the Justices having a keen desire to protect exclusionary efforts by patent holders, and that simply may not exist.

The European Commission has informed the pharmaceutical companies Johnson & Johnson (J&J, of the USA) and Novartis (of Switzerland) of its objections regarding an agreement concluded between their respective Dutch subsidiaries on fentanyl, a strong pain-killer. The Commission takes the preliminary view that the agreement delayed the market entry of a cheaper generic medicine in the Netherlands, in breach of EU antitrust rules.

Specifically:

Janssen-Cilag, the J&J subsidiary supplying the pain-killer fentanyl in the Netherlands, concluded a so-called "co-promotion agreement" with its close generic competitor Sandoz, a Novartis subsidiary, in July 2005. At the time there were no regulatory barriers to develop and market generic versions of the fentanyl patches and therefore for Sandoz to enter the Dutch market. The agreement foresaw monthly payments from Janssen-Cilag to Sandoz for as long as no generic product was launched in the Dutch market. Consequently, Sandoz abstained from entering the market with generic fentanyl patches for the duration of the agreement from July 2005 until December 2006. This may have delayed the entry of a cheaper generic medicine for seventeen months and kept prices for fentanyl in the Netherlands artificially high.

GlaxoSmithKline could face a multimillion-pound fine over allegations it paid other drug companies to slow down production of cheaper versions of its most profitable antidepressant, burdening taxpayers with inflated costs for NHS [National Health Service] medicines.

The Office of Fair Trading has launched an investigation into GSK, alleging it abused its market dominance by agreeing so-called "pay for delay" agreements between 2001 and 2004 to protect the position of its drug Seroxat.

The regulator claims Alpharma, Genetics UK and Norton Healthcare were paid by GSK to delay production of cheaper copycat versions of the drug which could have saved the NHS millions.

It looks like authorities around the world are finally waking up to the surprisingly cosy relationships between major pharmaceutical companies and some of their supposed rivals, the manufacturers of generic drugs. That's to be welcomed, since these "pay for delay" deals have allowed pharma companies to charge near-monopoly prices well beyond the expiry of their patents, at great cost to the public. As such, they offer yet another example of greedy corporations failing to keep the basic patent bargain with society.